Current Account and Real Exchange Rate Dynamics in the G-7 Countries

By Jaewoo Lee, M. Chinn. Social Science Research Network, 2002

196 citations recorded by the source corpus.

The canonical predictions of intertemporal open-economy macro models are tested by a structural VAR analysis of Group of Seven countries. The analysis is distinguished from the previous literature in that it adopts minimal assumptions for identification. Consistent with a large set of theoretical models, permanent shocks have large long-term effects on the real exchange rate but relatively small effects on the current account; temporary shocks have large effects on the current account and exchange rate in the short run, but not on either variable in the long run. The signs of some impulse responses point toward models that differentiate tradables and nontradables.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/f5ee6457c6dbcc0c871cc10824a2f937596d2cbb

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In Economics and Econometrics

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Citations in the corpus

• The J-Curve: a literature review (2004, unknown): “However, when Lee and Chinn (2002) consider the experience of the United States, Canada, the United Kingdom, Japan, Germany, France and Italy, their impulse response function analysis shows that ‘As the real exchange rate appreciates, the current account balance also improves’.”
• Current Account Imbalances and Real Exchange Rates in the Euro Area (2006, background): “These include Taylor (2000), Bussiere et al. (2003), Chinn and Prasad (2003), and Lee and Chinn (2006).”